Contracts are a vital lifeline for businesses. To ensure the health of your organization, these agreements must be properly executed. Every contract manager has a system for compliance tracking. Some still rely on manual methods, but many are crossing over to a contract compliance tracking system that automates key processes.
Should you make the switch, too? Check out the top five reasons why you must consider using contract lifecycle management (CLM) software to monitor compliance.
Five Reasons to Use CLM Software for Contract Compliance Tracking
It’s not enough that you’ve closed a deal and sealed its terms with a contract. You should also ensure you’re properly executing its terms and meeting your obligations. Contract compliance boosts efficiency, mitigates risks, and increases your chances for renewals and contract expansions.
These days, manual contract compliance tracking just won’t cut it anymore—not when competition is getting tighter, and customers are becoming even more demanding. It’s time you start considering available tech resources.
CLM software streamlines contract processes during critical stages, from initiation and negotiation to execution and renewal. It comes with core templates, automated functionalities, and consistent structures that fast-track workflows. It creates efficiencies that make compliance tracking easier to carry out.
Here are key reasons to start using compliance tracking software to improve contract compliance tracking for your organization.
Build a contract clause and template library
For effective contract compliance, you need a heap of templates to cover all your organization’s operations. While the actual data may vary, the terms and conditions are likely to stay the same for similar processes. Work with your in-house counsel to prepare compliance clauses that you can easily incorporate into your templates.
Take stock of the data you need to track
To ensure the agreements are properly executed, take the time to document every piece of information that needs to stay on your radar. The list may include end dates, compliance requirements, termination notice, obligations, and deliverables. Make sure the relevant stakeholders are notified of deadlines and required actions.
Clearly assign roles
The contract compliance process does not rely solely on the legal department. Every company unit has to do its part. To follow through on their responsibilities, the relevant employees or stakeholders have to be fully aware of what needs to get done.
Unclear and poorly communicated expectations can result in noncompliance or breach of contract. You need to define people’s roles and obligations and organize your contract management structure and access permissions accordingly.
Just because all the contracts are stored in a single repository does not mean that all users can have access to them. With our CLM software, you can configure access permissions so only relevant people can view and edit certain files. It lets you create roles and put them in an organizational hierarchy.
To guarantee that your organization consistently meets its obligations, track your performance and quantify it with metrics. These efforts will help you identify any areas of weakness and work to improve them.
Here are some contract metrics worth tracking:
- The number of contracts. Keep a record of your active, terminated, and renewed contracts.
- Approval time. To measure your system’s efficiency, record the time it takes to move a contract from initiation to execution.
- Cost per transaction. Compute the total costs associated with every agreement, from the time spent by in-house counsel to the fees paid to external consultants.
- Annual contract value. Calculate the average annual earnings from the agreements.
- Fulfillment of obligations. Measure the rate by which you successfully fulfill the contractual obligations.
Stay adaptable to changes
Businesses rarely stay stagnant. The same holds true for the regulatory environment. To a certain extent, contract compliance is about keeping up with new rules that pop up as your organization and the business landscape evolve. As you create a new product line or extend your scope of services, you’ll have to respond to changing regulatory requirements. Industry standards may also shift due to external factors.
Your organization can’t afford to sidestep any legal requirements. To ensure you remain compliant, your in-house counsel must stay abreast of the latest regulatory standards.
There’s no question that contract compliance tracking is essential to the sustainability and growth of your business. The question is how you must go about it. Should you stick to manual processes or start embracing the convenience of technology?
With CLM software promising to bring enormous benefits, such as freeing up lawyers to carry out value-added tasks and improving your team’s ability to meet your key metrics, maybe it’s not a matter of “if” but “when” you should make the jump.
Ready to give our CLM software a try? You’re welcome to try a demo.
First, you must establish an approval workflow by assigning a chain of approvers. Maintain a log of these workflows and keep a record of how the contracts are progressing along the approval process. You should also monitor contract performance by setting key performance indicators (KPIs) and regularly reviewing them.
Additionally, you must conduct regular audits to identify issues before they blow out of proportion. It will help you improve your contract terms and internal policies.
A contract tracker is a platform that allows organizations to automate contract administration, ensure compliance, schedule alerts, set metrics, and run reports. It provides a centralized repository that stores all contracts and files without compromising security. It also comes with an intuitive dashboard that allows users to easily access files and reports.
It’s time-consuming to monitor every element of a contract, so you must decide what to monitor. After that, you can assign this task to someone in your company. Store the contract in a secure location that keeps it searchable, then provide relevant people with the necessary access. Your team must measure contract performance against KPIs and report the findings to key stakeholders.
For contract compliance management to be effective, the responsibility must fall not only on one entity. It requires a joint effort. For many organizations, the responsibility is spread across company units, such as the legal department, procurement, and sales. You may put together a risk and compliance team to set minimum requirements and ensure they’re being met.